In the 1930’s the Great Depression followed by a severe and extended drought caused widespread hardship in rural America. The demand (in America and for export) for crops and livestock fell and then the drought hit. Millions of acres that had been plowed up to grow crops were dry and barren. The native vegetation that had historically held the soil in place during droughts was gone. The Great Plains of America experienced massive erosion characterized by dust storms that reached the east coast. This devastation caused the most significant migration in American history out of the mid-west. At the time the United States was predominately an agricultural nation and in response Congress passed a series of bills on soil conservation, crop insurance, farm price supports and nutrition assistance. In the 1930’s farm policy was characterized by attempts to fix prices or quantities of food grown or improve the rural economy. All of which pretty much failed. Subsequent attempts at managing the agricultural sector saw no greater success.
Nonetheless, every five years with changing goals and details Congress has managed to pass a new farm bill. The ability to pass the Farm Bill is due mostly due to the coalition created by including nutritional assistance in the farm bill. The various farm bills generally cover five areas:
- Loans. Farmers borrow funds from the government using their future harvest as collateral. The farm bill specifies the rates on the loans and if the market price is below the loan rate, farmers deliver the crop in lieu of payment.
- Commodity Payments. There are several types of payments given to farmers to provide income support. These tend to be for grains and commodities not fruits and vegetables and are paid based on historical production. These payments are made to the farmers who receive them whether or not the crops are grown. There are also price support payments that come into play if market prices are below target prices in the legislation.
- Conservation Reserve Allocation. The Farm Bill authorizes a certain number of acres of farmland that can be taken out of production and put to conservation purposes for a period of 10 years. Landowners are paid annually for these fallow acres. Eligible lands are generally degraded or fragile lands and the program is intended to protect the soil from erosion and the streams from herbicide, pesticide, fertilizer and soil laden runoff.
- Crop insurance. In recent farm bills crop insurance has become more important. The government subsidizes the cost of insurance to protect farmers from the risks of weather and price fluctuations.
- Supplemental Nutrition Assistance. Food stamps provide financial assistance to poor families. In 2012 47 million people received food stamps. Though in its earliest form the government handed out the excess food bought from farmers, today the program is financial providing up to $167 per month per person.
In each generation of congress the Farm Bill has changed and morphed. The historical favoring of grain crops impacted the make-up of the American diet. These days food stamps and the nutritional assistance programs represent 70-75% of the $145 billion budget. Payment to farmers in the form of direct payments, deficiency payments from the loan program and insurance payments account for about 13% of the budget. Conservation programs account for about 7% and all other programs account for 6% of the budget. Some of these agricultural other programs are really important to the future of food in America, but also tucked into the budget of the Department of Agriculture are a portion of the government support for the crop-based bio-fuels ($320 million) and funding for Climate Centers. The small amount of funding for biofuels belies its impact. Biofuels and the Renewable Fuels Standard (RFS) created under the Energy policy Act of 2005 have had a profound impact on agriculture in America and the costs of the farm programs.
Since passage of the Renewable Fuels Standard corn acreage in the United States increased by almost 30%, replacing other crops and removing land from the conservation reserves program. Corn prices rose from $2.42 to almost $7 a bushel in 2012; however, last week the price of corn has fallen to about $3.35 a bushel. The USDA is predicting a 14.03 billion bushel corn crop this year, despite farmers planting fewer acres this year than last. Perfect weather is producing a bumper crop and the demand for corn is down. In recent years about 40% or so of the corn crop has gone to the production of ethanol under the RFS. But the Environmental Protection Agency, (EPA) has indicated that they will propose to cut the RFS for 2014. This is a response to the fixed volume of ethanol that is required under the RFS. Annual U.S. gasoline use has declined from its 142-billion-gallon peak in 2007 to about 133 billion gallons in 2012 and ethanol now represents 9.74% of gasoline. There appears to be a practical limit of 10% of ethanol in gasoline.
The food stamp programs provides a safety net for low-income households in times of high or volatile food prices that are often caused by the bio-fuels program and the agricultural programs themselves. It is unclear if the coalition created by combining food stamp programs and farm subsidies can survive in 21st century America where the agricultural economy employs so few. In addition, new “critical” issues are driving our nation’s food policy. Nutrient pollution and algae blooms in our nation’s water supplies, genetically modified organisms, obesity, climate change, immigration are all impacting farm policy. What is clear is that one in six American households is classified as having food insecurity. By this measure our policies have failed. It is inexcusable that there is hunger in America.